Six years of quarterly data of a seasonally adjusted series are used to estimate

Question

Six years of quarterly data of a seasonally adjusted series are used to estimate a linear trend model as T_t = 153.30 + 1.31t. In addition, quarterly seasonal indices are calculated as S_1 = 0.96, S_2 = 0.98, S_3 = 1.15, and S_4 = 1.25. a-1. Interpret the first quarterly index. In other words, what is the value of the series in the first quarter as compared to the average? 4% below 4% above 96% above 96% below a-2. Interpret the fourth quarterly index. In other words, what is the value of the series in the fourth quarter as compared to the average? 25% below 75% below 25% above 75% above b. Make a forecast for all four quarters of next year. (Round your answers to 2 decimal places.)

Explanation / Answer

a-1) 4% below

a-2) 25% above

b) quarter 1 forecast =(153.3+1.31*25)*0.96=178.61

quarter 2 forecast =(153.3+1.31*26)*0.98=183.61

quarter 3 forecast =(153.3+1.31*27)*1.15=216.97

quarter 4 forecast =(153.3+1.31*28)*1.25=237.48

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